Over 150 Fab Projects Lead to Strong 2010 and 2011
Robust Equipment Spending and More Installed Capacity Expected
By Christian Gregor Dieseldorff, SEMI Industry Research and Statistics, San Jose, California (September 1, 2010)
Analysis of the latest edition of the SEMI World Fab Forecast indicates a 133 percent increase in equipment spending for Front End fabs this year and about 18 percent growth in 2011. Worldwide installed fab capacity (without Discretes) is expected to grow by 7 percent in 2010 and another 8 percent in 2011. Fab construction spending will increase by 125 percent in 2010 and an additional 22 percent in 2011.
SEMI’s fab database has been tracking individual fab projects by company since 1992. Using this “bottoms-up” approach, the data reveal that for both 2010 and 2011, over 150 fab projects will contribute an estimated $83 billion in spending. The projects tracked include construction projects and equipment spending for high volume, smaller capacity, MEMS, and Discrete, including LED, fabs.
Construction Projects Pick Up
Current investments in construction assure additional capacity for the future. The World Fab Forecast has identified a total of 54 construction projects for 2010 and the result is about $4.5 billion in construction spending. About half of these projects are for LED facilities (mostly in China), while 14 are for Foundries and six are for Memory fabs. Of the 54 construction projects, 22 are new facilities that will begin construction by the end of this year.
About 28 construction projects, including two greenfield sites, are on the horizon for 2011— representing another $5.5 billion in investment.
Examining construction projects by industry sector, Foundries are expected to spend the most in 2010 (over $2 billion), followed by Memory. However, this will change in 2011, when Memory companies increase investments in huge fab construction projects with over $3 billion in spending.
2010 spending totals for construction projects reflect a growth rate of 125 percent compared to 2009. However, because 2009 was such an unusually weak year, $4.5 billion remains the lowest yearly total since 2003. Even 2011 spending, with about $5.5 billion projected, will be lower than levels seen between 2004 through 2007.
Figure 1 illustrates construction spending over time compared to the number of fabs in the construction phase. In 2011, fewer but larger fabs will carry higher construction costs.
Equipment Spending in 2010 Not So Dramatic, when Compared to Prior Years
Spending on equipping fabs will increase by 133 percent in 2010 to an estimated $34 billion. This is a record growth rate, albeit off of the historic low of 2009 (Figure 2). If compared to 2008 spending, however, 2010 total equipment spending will be only 27 percent higher. If compared to 2007, 2010 spending is actually 11 percent lower. The World Fab Forecast report predicts spending in 2011 to increase 18 percent, bringing total spending to $39B, finally surpassing 2007 spending levels. In other words, it will take three years for spending to recover from the downturn that started in 2008.
Spending on equipping fabs includes Discrete (such as LED and MEMS), Pilot lines and R&D facilities around the world. Although LED fabs represent a relatively small portion of spending (about $1.4 billion in 2010), this sector shows the most robust growth rate for the year. Memory fabs will spend the most on equipment in 2010, followed by Foundries, MPUs and Logic. This trend is expected to continue in 2011.
Fabs Beginning Operation
SEMI’s World Fab Forecast also provides details of facilities beginning operations in 2010 and 2011. By the end of 2010, about 22 facilities will begin operations. Analyzed by sector, half of these are LED, six are Foundries, three are Analog and two are Logic. No new Memory fabs will begin operation in 2010. However, in 2011, another 28 facilities are expected to begin operations, including four Memory fabs.
More Capacity Expected to Come Online in 2010 and 2011
By late 2009, companies announced increased capital expenditures for 2010, with some companies announcing additional increases over successive quarters to reach record levels. Large investments in upgrades naturally lead to increases in capacity. Worldwide installed fab capacity (without Discretes) is expected to grow by 7 percent by the end of 2010 to 14.4 million 200 mm equivalent wafers per month (wpm), and by another 8 percent in 2011 to 15.8 million wpm (Figure 3).
After large losses of capacity in 2009, due to closing fabs and bankrupt companies, installed capacity in 2010 will creep back up to slightly surpass 2008 capacity levels. By 2011, installed capacity growth will fall in line with historical levels. The Memory sector accounts for the largest share of worldwide installed capacity, about 41 percent in both 2010 and 2011. Foundry capacity follows having grown their market share from 24 percent in 2009 to 26 percent in 2011.
Good Times, and “Somewhat More than Normal Uncertainty”
Triggered by the economic downturn and panic of late 2008, the last two years will be remembered for severe cuts and under-spending to levels never seen before. The spending spike that began in the second half of 2009 and continues into 2010 is actually a self-correction from the downturn. Slower growth rates will prevail in 2011. Even with the dramatic increases in spending and capacity this year, it will take until the end of 2011 for the industry to recuperate and show more sustainable, normal progress.
In recent months, many have voiced concerns about supply/capacity outstripping demand in the context of a possible “double dip” recession. The industry has shown how flexibly and quickly it can adapt to the “ups and downs” of the larger economy; within one year, it recoiled from drastic historic cuts to record spending growth rates. To quote George Burns, president emeritus of Strategic Marketing Associates and founder of the Fab Database Reports, the industry now enjoys “good times in the middle of somewhat more than normal uncertainty.”
In these uncertain times, SEMI’s World Fab Database reports continue to track individual fab projects very closely. Updates and more information on the reports can be found at www.semi.org/fabs.
SEMI World Fab Forecast report provides from high-level summaries and graphs; in-depth analyses of capital expenditure, capacity, technology and products, down to the detail of each fab; and forecasts for the next 18 months by quarter. These tools are invaluable for understanding how 2010 and 2011 will look, and learning more about capex for construction projects, fab equipping, technology level, and products.
The difference between the SEMI Worldwide Semiconductor Equipment Market Subscription (WWSEMS) data and the World Fab Forecast and its related Fab Database reports is that the fab database reports track any equipment needed to ramp the fab, upgrade technology nodes, expand or change its wafer size whether it is new equipment, used equipment, or in-house equipment, while WWSEMS tracks only new equipment.
San Jose, California
September 7, 2010